Despite attempts to increase local wheat production imports remain high, reports Sherine Nasr Despite successful attempts to increase local wheat production Egypt continues to import as much wheat as ever. The latest figures reveal that wheat imports have remained more or less static at seven million metric tonnes (mmt) per year. No other grain provokes more discussions, disputes among concerned ministries and detailed reports by experts as wheat does. How much to plant has been a constant headache for the Egyptian government. "It is difficult to get reliable figures on how much wheat Egypt plants every year, how much is kept as stock and how much is exported," says the managing director of one of Egypt's largest wheat suppliers. One initiative recently adopted by the Ministry of Agriculture in an attempt to boost wheat production, however, seems to be bearing fruit. According to Hassan Abdel-Ghaffar, regional market director for the Middle East and East Africa at US Wheat Associates, an increase in land cultivated with wheat, combined with the adoption of high-yield varieties, has led to increased productivity. "Land cultivated with wheat in Egypt is estimated at almost three million feddans, and that is set to rise by an additional 150,000 feddans," says Abdel-Ghaffar. The result, he adds, is that Egypt's annual wheat production averages 6.5 to seven mmt compared to two mmt in the eighties. "This means that production has tripled in the past 20 years, a major achievement given the limits on the available water and land." Farmers were provided with incentives to grow wheat during the last season, with the government agreeing to pay more to farmers growing and supplying the grain and guaranteeing premiums for farmers delivering clean harvests. Yet Egypt's seven mmt of locally- produced wheat is insufficient to cover the demands of a market that consumes almost twice that figure, and Egypt is the world's second largest importer of wheat. The situation reached its nadir in 2003 when the government decided to subsidise the production of extra fine white flour, the main ingredient in producing white feno bread. "That year international wheat prices rose owing to a variety of reasons -- including a sudden hike in the cost of ocean freight -- which is why the government took the decision to subsidise extra fine flour," explains Abdel-Ghaffar. But the 50 per cent subsidy quickly created a black market and resulted in serious losses being incurred by private sector mills, many of which went out of business or hired out their milling plants for other purposes. The government, says Abdel-Ghaffar, is widely expected to annul its subsidies on extra fine white flour in the next few months. Five years ago Egypt imported most of its wheat from the US. That position changed when Australia and Russia began offering wheat at lower prices. The US now ranks fifth in terms of the wheat imported into Egypt, with annual imports falling from four mmt three years ago to two mmt last year. "The process of buying wheat could not be more transparent or straightforward," insisted Dick Prior, US Wheat Associates' regional vice president for the Middle East and East Africa, during a seminar held recently in Cairo. Prior denied claims the US was trying to pressure Egypt into buy its wheat. "It is purely a process of supply and demand. The only determining factor for Egypt is the price. The supplier who offers the best price gets the deal." The fact remains, though, that in the last 25 years the US has invested $230 million in Egypt's wheat industry including, says Prior, building the Safaga silo at a cost of $80 million and the Alexandria and the Shoubra silos for $60 million each, as well as investing in training and education. The US Department of Agriculture also provides $200 million worth of credit guarantees to the Middle East region. "By virtue of the credit, short-term, low-interest loans can be offered to Egyptian private sector buyers," points out Prior. Unfortunately Egypt has not made the most of this line of credit. "The fluctuation in the exchange rate has scared people off," he says. It is estimated that the world's wheat production for 2005/2006 will drop by 2.4 per cent -- almost 15 mmt -- compared to last year's record harvest, with production in the EU falling by 14 mmt. In the meantime, demand is expected to increase by two per cent, or 11.6 mmt. With stocks 17 per cent down on their 10-year average prices could well increase. International wheat prices are also vulnerable to changes in the cost of ocean freight, which rose steeply in 2003 and remain volatile. "While the capacity of the world's ocean-going fleet is known levels of demand remain variable," says Shannon Schlecht, US Wheat Associates' assistant regional director. Among the factors impacting on ocean freight costs are commodity demand, oil prices, seasonal pressure, and the continuing economic growth of China, which imports ever- increasing quantities of iron, energy and food.
